Is Sustainability a Competitive Advantage? Unveiling the Relationship Between ESG Scores and Corporate Financial Performance in IT Startups

Abstract

Environmental, Social and Governance pillars are among the most important issues that nowadays we, as a society, are called to confront. It comes as no surprise then, that businesses are being considered frontline agents in this battle, asked to convert their economic production towards more sustainable, ethical and socially proactive venues. International acclaimed agencies like the IFRS Foundation, Standard & Poor’s and MSCI, just to name a few, have come to create new branches that focus specifically on these matters, guiding firms into an ESG focused path. Considering the magnitude of this phenomenon, new ways of quantifying companies’ effort have been created: ESG scores. Prior research has focused on the relationship that might exist between the Corporate Financial Performance and the ESG score, resulting in a prevailing positive result. Relatively little though has been said about the startup world: how do young companies position towards this? Does the ESG friendliness influence the early days of a business? This thesis has two main goals: the first is to propose a theoretical model in order to evaluate the ESG score of startups and, after, to see whether the grade influences the money raised by the companies. The research is conducted on a sample of 120 startups, whose Headquarters are in the United States, and pertaining to the IT sector. The expected result is that from the regression analysis that will be performed, a positive correlation between the ESG score and the amount of financing raised by the startup will be found.